free trade, unilateral and economic trade sanctions


May/June 1999
Middle East Insight

The Impact of Sanctions on American Interests in the Middle East

Speaking to the Veterans of Foreign Wars in 1983, President Reagan said: "In 1980, the people made it clear they wanted a new direction in foreign affairs. Yet, changing America's foreign policy is a little like towing an iceberg. You can only pick up speed as the frozen attitudes and mistakes of the past melt away."

The ending of the Cold War led us in a new direction in foreign policy. Looking back, many would say it was inevitable. I would assert that a change in the nature of America's relationship with Iran is just as inevitable, but we have many icebergs of frozen attitudes and knowledge gaps that must melt away first.

Today, the United States has imposed sanctions on Iran, Libya, Syria, Iraq, Azerbaijan, Pakistan, India, and numerous other countries. All but those on Iraq are unilateral. And yet, the United States government tells industry to go forth and be competitive. How?

Conoco became concerned with the lack of balance in America foreign and trade policy two years ago and championed the formation of the USA*ENGAGE coalition. This coalition of over 700 companies, farmers and associations is not "anti-sanctions," as those in favor of continued sanctions try to characterize USA*ENGAGE. The coalition is simply promoting a more balanced and effective foreign policy. We support the use of sanctions under conditions that promise success and when our allies join us in the use of sanctions. Unilateral sanctions seldom work and are never effective in the long-term.

USA*ENGAGE believes that the following principles should guide the formulation of U.S. foreign policy:

    1. U.S. values and interests are best advanced by sustained involvement in world affairs by both the public and private sectors.
    2. The expansion of free market economies and rising living standards are crucial ingredients of political freedom and respect for human rights.
    3. Challenges to U.S. interests and the rule of law should be addressed as much as possible in concert with our allies and trading partners.
    4. The U.S. government should adopt a standard of ongoing accountability, so that unilateral foreign policy sanctions are evaluated by the following criteria:

We do not disagree with the aims of U.S. foreign policy and we certainly do not excuse, apologize for, or trivialize offensive behavior. We do disagree with those who say we advocate a "morally neutral" foreign policy. Too few Americans, particularly lawmakers and journalists, seem to understand what actually occurs when American businesses sell goods or services or directly invest in other countries. Regardless of those countries' politics, U.S. values, principles, and respect for the rights of all people automatically travel with us. It is the example we set by our corporate value, policies and business practices which change behavior and values, not legislated moralizing by our government. No matter how much the U.S. government wishes not to appear arrogant, it is uniformly perceived this way, even among our closest allies.

Let me give an example of the kind of misunderstanding that concerns me. When we invest in another country, we normally commit to spend several hundred million and sometimes billions of dollars. Such commitments are reported, even in Congressional testimony, as if a U.S. corporation were writing a check for the commitment and sending a check to the foreign host government. This is a gross over-simplification. Typically, we spend three to 10 years buying huge sums of mostly American services, equipment, and technology before producing any income either for ourselves or the host country.

There is no "windfall" to the host government, and the tangible economic benefits to the host government and the U.S. company investor usually are not enjoyed for several years after the initial investment.

Take the example of Conoco's Sirri Island development project, proposed for offshore Iran in 1995. Three years of building a relationship with the National Iranian Oil Corp., in competition with Total of France, culminated in Conoco and Total both being recommended as qualified to the Iranian President. President Rafsanjani selected Conoco, a U.S. company, to send a friendly signal to Washington. However, Washington was not interested in receiving a positive signal from Iran.

Total signed the contract and $600 million that would have been spent on U.S. steel, pumps, tanks, turbines, and other equipment instead went to France and the European Union. Soon Total will begin producing the fields. In addition, Total was positioned--as we had hoped to be--to compete successfully for further opportunities, leading to their much larger South Pars development contract. Our first transaction was sanctioned by the U.S. Government, leading to the Iran-Libya Sanctions Act. In contrast, the U.S. government waived penalties against the French for the much larger South Pars contract, effectively eliminating the Iran-Libya Sanctions Act as a deterrent to investment by any other party except Americans.

Iran, for Conoco, is our most well-known sanctions disappointment. But we also lost a huge portion of shareholder value when the U.S. government--not the United Nations--ordered us out of Libya in the 1980s. In both countries, we are forced to sit on the sidelines while our international competitors proceed with investments, with the encouragement of their home governments.

While we are not prevented from doing business in Syria and Azerbaijan, the opportunities are greatly complicated by other provisions of U.S. law that discriminate against those countries and those American companies who invest in them.

I would suggest that allowing Americans--all Americans, meaning humanitarian, human rights and environmental NGOs, academics, and businesses--to do what we each do best, will have the greatest effect on attitudes and behaviors of foreign governments and peoples. Let us influence the countries where we are guests to adopt the international norms our policies are designed to advance.

As President Khatami of Iran stated on CNN last January, the American and the Iranian peoples want better relations; it is only their governments that are standing in the way. This was a very bold step for him. This first step, however, has not yet been matched with an equal and corresponding step from the United States, although the U.S. government thinks it has responded appropriately. There is so little understanding between both governments and they are failing to effectively communicate with one another.

Contrary to the rhetoric still predominant in the media, Iranians appreciate our culture and wish to befriend us. Likewise, Americans don't hate the Iranian people. Since the press seems obliged to continually resurrect the hostage crisis, this one event--as hard as it is to forgive--still skews all our thinking about Iran 20 years later.

Nevertheless, Ambassador Bruce Laingen, himself a former hostage, has publicly called for dialogue and reconciliation with Iran. President Carter's Secretary of State, Cyrus Vance, who resigned over Iran, has publicly called for a restoration of relations.

President Clinton recently recalled his conversation with Prime Minister Rabin shortly before the signing of the Oslo Accords. Referring to all the years of hatred and conflict with the PLO, Rabin said, "But I guess you don't make peace with your friends." So if, as he observed, the PLO and Israel can make peace, if Nelson Mandela can forgive those who imprisoned him, if the United States can heal from our real and legitimate grievances with Germany, Italy, Japan, Russia and Vietnam, what stops us from making peace with Iran? Surely the time has come to reconsider our policies toward Iran, to reach out with a hand of friendship and reconciliation.

I have asked President Clinton to take a bold step, to publicly declare that 20 years of hostility is enough. A friendly Iran is in our interests much more than a hostile Iran. We are now at a crossroads where we can, and must, make a correct choice. I would also ask members of Congress to support the Administration in a new initiative. Don't use the mistakes of the past as justification to criticize a more balanced policy in the future. There is no harm in engaging in an open-minded evaluation of our choices, and I believe that such an evaluation will produce many more ideas and opportunities than the frozen policy of sanctions we currently maintain.

Conoco would like to invest in Iran, Azerbaijan, Syria, Libya and other countries in the Middle East. We seek access to the entire region. We believe that our presence can contribute to reconciliation and the normalization of relationships between countries. Serious sanctions either restrict or prevent our ability to invest in each of these countries. Whether we--along with other Americans--can do what we do best, depends directly on the success of resolving old conflicts. We want to contribute to the normalization of relationships between our government and the nations of the Middle East. We can only do this if allowed to become involved in the region.

Archie W. Dunham is president and CEO, Conoco Inc.

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